Market Structures Chapter 7 - PowerPoint Presentation

Slide1

Market Structures

Chapter 7Slide2

Perfect Competition

Large numbers of buyers and sellers

Buyers and sellers deal in identical products

Each buyer and seller acts independently

Buyers and sellers are reasonably well-informed about prices and products

Buyers and sellers are free to enter and leave the marketSlide3

Imperfect Competition

Occurs when one of the five conditions doesn’t existSlide4

Business Control on Price

<=None====================.Complete=>Slide5

Monopolies

Natural

Monopoly-

exists

when a variety of factors make competition unworkable, financially unfeasible or impossible

Geographical Monopoly-

When

only one business provides products or services to a local area,

Technological

Monopoly-

A

business that's first to market a product or service may get a patent or copyrightSlide6

Government Regulation

Prevent excess price

Quality of service

Monopsony Power

Promote competition

Natural MonopoliesSlide7

Market Failures

Inadequate

competition- When

adequate competition does not exist

Inadequate

information- Buyers

and sellers are not well informed

Resource Immobility-Resources are not free to move from one industry to another.

Public Goods-Public goods are those goods and services provided by the government because a market

failed to provide them.

Negative externalities- harmful side effect that affects an uninvolved third party. In most events, it constitutes external cost.

Positive Externalities-beneficial side effect that affects an uninvolved third party.Slide8

Externalities

Positive production

externality:

When a

farm's production increases

the

well-being

of others but

the farm

is not

compensated

by those others

.

Example: Beehives of honey producers have a positive impact on pollination and agricultural output

Negative

production

externality:

When a

firm's production reduces

the well-being of others who are not compensated

by the firm.

Example: steel plant pollutes a river but plant does not

face any

pollution regulation Slide9

Price Controls

Price discrimination-

pricing

strategy that charges customers different prices for the same product or service

.Slide10

Laws

R

egulating

B

usiness

Sherman Act-

P

assed in 1890, prohibits

certain business activities that federal government regulators deem to be anti-competitive, and requires the federal government to investigate and pursue trustsSlide11

Laws

R

egulating

B

usiness

Clayton Act

- Passed in

1914, proscribes certain additional activities that had been discovered to fall outside the scope of the Sherman

Act

price discrimination between different purchasers, if such discrimination tends to create a monopoly

exclusive dealing agreements

tying arrangements

mergers and acquisitions that substantially reduce market competitionSlide12

Laws

R

egulating

B

usiness

Robinson–

Patman

Act

of 1936 amended the Clayton Act. The amendment proscribed certain anti-competitive practices in which manufacturers engaged in price discrimination against equally-situated distributors.Slide13

Laws

R

egulating

B

usiness

Federal

Trade Commission Act of 1914

established the Federal Trade Commission. The Act,

outlaws

unfair methods of competition and outlaws unfair acts or practices that affect commerce.Slide14

Government Enforcement

Federal Trade Commission (FTC)

Food & Drug Administration (FDA)

Federal Communications Commission (FCC)

Equal Employment Opportunity Commission (EEOC)

Occupational Safety & Health Administration (OSHA)Slide15

Government Enforcement

Securities & Exchange Commission (SEC)

Environmental Protection Agency (EPA)

Federal Aviation Administration (FAA)

National Labor Relations Board (NLRB)